Typical Investment Process - New Issue High-Yield CMBS
Deal Selection- Strong relationships with CMBS issuers
- Negotiated transactions
- Limited number of buyers for below investment grade CMBS
Due Diligence- Employ a “ground up” approach
- Review each asset utilizing localized real estate knowledge
- Site inspect each asset and review competitive assets in its submarket
Underwriting- Prepare cash flow forecast for every asset
- Assess viability of cash flow to meet debt service and terminal value to retire principal
- Ability to underwrite large portfolios effectively
Protect Downside- Remove loans with outsized loss risk
- Stress default scenarios to test yield
- Credit culture focuses on return of principal
Control- Invest in new issue CMBS where Eightfold can act as controlling class representative
- Principals have been at the forefront of special servicing since 1993
- Ability to direct workouts to maximize recoveries on defaulted loans
Strategic Relationships- Special Servicers
- Property Owners
- Brokers
The investment process entails a great deal of complexity, which limits competition and fosters an inefficient pricing environment.
